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Flotation nets Pounds 58 million

Melbourne University has received a cash bonanza from the sale of a spin-off company selling internet addresses. Julia Hinde reports.

Melbourne University has pocketed Aus$86 million (Pounds 34 million) through floating a university spin-off company on the Australian stock market.

The university sold 85 per cent of its 100 per cent stake in Melbourne IT Ltd, a company established three and a half years ago by the university to register internet domain names.

Valued at Aus$110 million (Pounds 44 million) when it was listed, during its first day of trading shares in Melbourne IT rose from an issue price of Aus$2.20 (88p) to close at Aus$7.95 (Pounds 3.20), meaning the university saw its remaining 15 per cent stake rise in value from Aus$16 million (Pounds 6.4 million) to Aus$60 million (Pounds 24 million). The total university return from the flotation could be close to Aus$145 million (Pounds 58 million).

Melbourne University has been responsible for registering Australian commercial internet addresses for the past decade, but turned the operation into a business only in 1996.

"In most developed countries around the world, which got into the internet in the first ten years, the people who were responsible for distributing domain names were generally university people," said Peter Gerrand, chief executive of Melbourne IT and a professor at the university.

"A technical officer in the computer science department at Melbourne University did it here in Australia. But he could not keep up with the load."

A newspaper article in June 1996 revealed that companies were having to wait up to six months to register their domain name. Melbourne IT was the result.

"Now, three and a half years later, we have gone international," said Gerrand, who has considerable shares in the newly sold company. "We have registered 120,000 Australian businesses on the web and 60,000 overseas companies. We have 110 people on the team."

The university's profits from the sale go to Melbourne Enterprises International (MEI), the commercial arm of the university, which, as well as owning several other spin-off companies and start-ups, undertakes consultancy and runs a language centre.

"We will donate most of it to the university," explains David Lloyd, managing director of MEI. "A proportion will be retained in the business."

A spokeswoman for the university said it was yet to be decided how to spend the windfall. "It's being discussed," she said.

As of the sale, the company will move out of the university premises it has been using until now, but there may be considerable Christmas cheer among employees who were offered shares as part of the sell-off. On average, staff purchased 3,000 shares, which on the first day of trading could have meant a gain of more than Aus$17,000 (Pounds 7,000).

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